OUTSOURCING FACTS BY GREENPENN
January 29, 2018 | Neeraj Goel
To stay competitive in the business world, corporations increasingly rely on outsourcing to make their operations more affordable. In the U.S., outsourcing is a hot topic; whether it helps or harms the economy is the subject of frequent debate among economic experts.
In the last two decades, outsourcing has been steadily picking up steam as companies of all sizes jump on the bandwagon.
GreenPenn conducted a brief study on the state of outsourcing in the U.S., and what we found might surprise you.
We begin with a broad overview of outsourcing, including a look at how many jobs are relocated overseas, what motivates companies to outsource and how workers fare financially.
How many jobs are outsourced by the U.S. each year?
Pinning down the exact number of jobs that are moved overseas each year is difficult. It's estimated that 300,000 positions are outsourced annually.
How do Americans feel about outsourcing?
The average citizen takes a less than positive view of outsourcing. During the height of the economic crisis, 86% of Americans said they felt that losing jobs overseas only added to the negative financial fallout.
What percentage of employers support moving jobs back to their home country?
Outsourcing's popularity among major companies is evident. Just 16% say they either have or would move jobs back to their home turf, with more than 70% citing poor offshore supplier performance as the reason.
What's the number one reason companies to choose to outsource?
Cost reduction is overwhelmingly the most compelling reason that companies choose to relocate jobs overseas. In the IT and business sectors, cost factors into 87% of outsourcing decisions.
How effective is outsourcing at saving companies money?
Among IT companies that depend on outsourcing to lower their overhead, 30% say that it's been an effective strategy to reduce costs. Fifty-five percent say it's somewhat effective while 15% claim that it's not effective at all.
What's the global outsourcing industry worth?
Outsourcing is big business; it's estimated that worldwide, the industry generated $507 billion in revenue in 2014 alone. Electronics manufacturing accounted for the largest share, at approximately $381 billion.
What's the biggest complaint among companies that outsource?
While outsourcing can save money, it's not without certain drawbacks. Nearly 50% of employers that outsource say the quality of their service providers and a reactive versus proactive attitude are the most frustrating issues to deal with.
How much does the average outsourced worker make?
Wages for outsourced workers vary widely by industry and by the country where they're employed. In the manufacturing industry, for example, Chinese workers make an average of $1.36 per hour, compared to $23.32 for U.S.-based employees.
How big is the freelance outsourcing economy?
The Internet has made it possible for just about anyone to become a freelancer these days, and in the U.S., there are 53 million freelance workers. It's estimated that the global online workforce generates between $1 and $2 billion annually.
What tasks are least likely to be outsourced?
Eighty-nine percent of companies say they wouldn't outsource strategic planning functions. Nearly 80% don't plan to outsource sales or marketing jobs.
OUTSOURCING BY INDUSTRY
Outsourcing rates vary by industry, with some sectors utilizing foreign workers more than others. We've compared how often outsourcing occurs across several of the most prominent fields.
How common is outsourcing in the IT industry?
More than 60% of the total outsourcing market is composed of IT workers. The majority of jobs that are outsourced fall under the support services umbrella.
How prevalent is outsourcing in the banking industry?
Almost 40% of help desk positions in the banking industry are held by outsourced workers. More than a third of jobs in payroll and benefits administration are also occupied by remote workers.
What about insurance?
Outsourcing is less common in the insurance field, although certain tasks are more likely than others to be turned over to overseas workers. Nearly a third of application development processes are outsourced, along with a quarter of IT and payroll functions.
How many customer service positions are outsourced?
Approximately 54% of companies in the customer service industry utilize overseas workers. Forty-six percent of companies outsource order fulfillment while 41% employ foreign workers as technical support specialists.
What percentage of companies outsource call center positions?
Forty-three percent of companies outsource call center management positions to workers in other countries. This trend is expected to grow, with 23% of employers saying they plan to outsource call center employment in the future.
How often are legal tasks outsourced?
Outsourcing is becoming more common in the legal industry; 67% of employers leave the composition of legal opinions to foreign workers. Sixty-five percent outsource legal counsel, and research services are outsourced 56% of the time.
OUTSOURCING TO ASIA
The vast majority of outsourced positions are held by Asian workers. We've concluded our study with a look at which countries account for the largest share of outsourced jobs.
Which Asian country do employers outsource to the most?
India has become a hotspot for outsourcing, with 59% of employers worldwide employing Indian workers. Twenty-two percent of companies say they have plans to move at least some of their operations to India or would consider doing so.
Which sector is most likely to outsource to India?
In recent years, India has become the preferred destination for IT positions. India holds approximately 65% of all outsourced IT jobs.
Which Indian city sees the most outsourcing activity?
Bangalore ranks as the number one city for outsourcing in India, followed by Mumbai. Delhi and Chennai also make the top five.
How popular is China for outsourcing?
China ranks as the second most popular destination for outsourcing, with 36% of companies relocating jobs here.
How many jobs are outsourced to China?
Between 2001 and 2013, 3.2 million U.S. jobs were lost or displaced in favor of Chinese workers. Approximately 2.4 million of those jobs were in the manufacturing sector.
Which state loses the most jobs to Asian outsourcing?
California has suffered the biggest losses in connection with Chinese outsourcing. More than 564,000 Californians saw their jobs moved overseas between 2001 and 2013. Texas came in second, with more than 304,000 jobs lost.
Which Asian countries are the least popular for outsourcing?
Thailand, South Korea and Indonesia are relatively untapped as far as outsourcing goes, with just 4% of multinational companies employing workers in these countries.
SOURCES AND REFERENCES
- Congressional Research Service
- Economic Policy Institute
- Economic Policy Institute
- Center for American Progress
- Plunkett Research
- Bureau of Labor Statistics
- The Economist
- Freelancers Union